If you are a withholding agent with tax type BIR Form 1601C, you must withhold income taxes from your employees’ salaries.
But unfortunately many are still confused about how to do it wisely. The main reason why our fellow taxpayers are having a hard time is that they do not know how to compute the tax that must be withheld for BIR Form 1601C.
So in this short article, I will teach you how to compute the tax you should withhold from your employees in a very easy way.
By easy, I mean you don’t need to manually compute the tax because you will use an Excel template for it. You can download the excel template from the link at the end of this article.
Let’s dive into the actual process.
Table of Contents
- How to Compute the Income Taxes to be Withheld from the Employees’ Compensation?
How to Fill Up the Part II of BIR Form 1601C?
- 14 – Total Amount of Compensation
- 15 – Statutory Minimum Wage for Minimum Wage Earners (MWEs)
- 16 – Holiday Pay, Overtime Pay, Night Shift Differential Pay, Hazard Pay (for MWEs only)
- 17 – 13th Month Pay and Other Benefits
- 18 – De Minimis Benefits
- 19 – SSS, GSIS, PHIC, HDMF Mandatory Contributions & Union Dues (employee’s share only)
- 20 – Other Non-Taxable Compensation (specify)
- 23 – Less: Taxable compensation not subject to withholding tax
- 25 – Total Taxes Withheld
- What to Do Next?
How to Compute the Income Taxes to be Withheld from the Employees’ Compensation?
Step 1: Prepare the Necessary Data to be Entered
In short, these are the data you must enter in the tax computation for BIR Form 1601C. Please refer below for the complete information needed.
- Complete name of your employees (First name and last name will suffice)
- TIN of your employee
- Basic pay or basic salary of your employee
- Overtime pay, holiday pay, nighshift differential, and hazard pay if any
- Absences and undertime
- Miscalculation adjustments or other adjustments
- Incentives if any
- 13th month pay
- De Minimis if any
- SSS employee deduction
- PhilHealth or PHIC employee deduction
- PagIbig or HDMF employee deduction
For this guide, let’s say I am filing for December 2021 with the following details of my employees.
|Complete Name||PEDRO PENDUCO||JUAN DELA CRUZ|
|OTP, HP, ND, and HP||0.00||0.00|
|Absences and Undertime||0.00||0.00|
|SSS employee deduction||157.50||1,125.00|
|PHIC employee deduction||150.00||375.00|
|HDMF employee deduction||70.00||100.00|
For easy demonstration, let’s say there is no overtime, holiday, nightshift differential, and hazard pay. Let’s say my employees also have no absences and undertime, adjustments, incentives, and de minimis.
But because the 13th-month pay is required to be paid every 24th day of December, they have a 13th-month pay equivalent to their one-month salary. To compute SSS, PagIbig, and PhilHealth, you can refer to the contributions table in the References section.
Step 2: Download the Excel File
You can download the excel file here.
Step 3: Fill Up the Excel File
Since you have complete information, you can now fill up excel for tax computation for BIR Form 1601C.
You just need to match every detail in the column.
Enter the exact details in excel and the computation of the tax due that you must remit will be automatic.
In this excel file, there is a column called “MWE or NOT“. For convenience, just enter NOT all the time. Trust me, it will be easier for you to file later on.
After you enter all the details, excel will compute it. At the bottom, you will find the overall total of each column. These will be used to fill Part II of BIR Form 1601C.
You can visit THIS LINK to see the final result of my work.
How to Fill Up the Part II of BIR Form 1601C?
If you notice in the excel file, there are Item Numbers in the other columns. These item numbers are the exact item number you will find on BIR Form 1601C. This is exactly what we will put in eBIRForms.
Please refer to the guide below on how to input the amounts in the eBIRForms.
14 – Total Amount of Compensation
15 – Statutory Minimum Wage for Minimum Wage Earners (MWEs)
16 – Holiday Pay, Overtime Pay, Night Shift Differential Pay, Hazard Pay (for MWEs only)
17 – 13th Month Pay and Other Benefits
18 – De Minimis Benefits
19 – SSS, GSIS, PHIC, HDMF Mandatory Contributions & Union Dues (employee’s share only)
20 – Other Non-Taxable Compensation (specify)
You can specify if any.
23 – Less: Taxable compensation not subject to withholding tax
25 – Total Taxes Withheld
Please note that you must only enter the totals in the green cells in eBIRForms.
This is the final result in eBIRForms when you have finished accomplishing it.
What to Do Next?
Now that you know how to compute income tax withheld on compensation in Part 2 of BIR Form 1601C, you can file the BIR Form 1601C itself.
Recommended Reading: BIR Form 1601C Filing and Payment (A Complete Guide)
Philippine Social Security System. (n.d.). SSS Contribution Table. Social Security System. Retrieved January 10, 2022, from https://www.sss.gov.ph/sss/DownloadContent?fileName=2021-CONTRIBUTION-SCHEDULE.pdf
Home Development Mutual Fund. (n.d.). PagIbig Contribution Table. Pag-IBIG Fund. Retrieved January 10, 2022, from https://www.pagibigfund.gov.ph/document/pdf/circulars/provident/HDMF%20Circular%20No.%20274%20-%20Revised%20Guidelines%20on%20Pag-IBIG%20Fund%20Membership.pdf
Philippine Health Insurance Corporation. (n.d.). PhilHealth Contribution Table. PhilHealth. Retrieved January 10, 2022, from https://www.philhealth.gov.ph/news/2019/new_contri.php
Department of Labor and Employment. (n.d.). FAQs on 13TH MONTH PAY. Retrieved January 10, 2022, from https://bwc.dole.gov.ph/faqs-on-13th-month-pay